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Knight Swift delivers a surprise message to Wall Street: we had a better quarter than you thought

Knight Swift (NYSE: KNX) surprised investors Thursday with the disclosure that its fourth quarter 2018 earnings – to be released January 29 – were going to be much better than expected. On a day when stocks overall were trading mostly neutral, that news helped propel several other carriers higher.

In its announcement, Knight-Swift said it expected its adjusted earnings per share (EPS) for the quarter to come in between $0.91-0.93 cents per share. It earlier had given guidance that its earning would be between $0.71-0.75 cents per share. It also increased its outlook for the first quarter of 2019, which is just 17 days old, and said its EPS would be between $0.52-0.55 cents compared to earlier guidance of $0.50 to $0.54 cents. Second quarter projections were $0.62 to $0.66 cents per share. Its adjusted EPS in the third quarter was $0.65 cents.

Knight Swift said the reasons for the increase were “increases in revenue per loaded mile, excluding fuel surcharge, improved safety results, lower fuel costs, and meaningful improvements in the adjusted operating ratios across the Swift reportable segments.”

Knight Swift has no scheduled conference call with analysts after its earnings are released.

The Knight Swift disclosure appears to be the obvious catalyst behind higher truckload carrier stock prices midday Thursday. At approximately 11:00 a.m. EST, USA Truck (NASDAQ: USAK) was up 5.04 percent to $17.50, Marten Transportation (NASDAQ: MRTN) was up 3.94 percent to $18.45, J.B. Hunt (NASDAQ: JBHT) rose 2.31 percent to $99.19 and flatbed specialist Daseke (NASDAQ: DSKE) was up 3.13 percent to $3.95. Knight Swift itself rose 4.76 percent to $30.456.

 Source: SONAR
Source: SONAR

The projections for the first half of this year was “conservative,” according to the transportation team at Morgan Stanley led by Ravi Shankar. “We’d point out that the positive announcement is attributed to macro, cyclical, and internal cost control and execution reasons,” the team said in a note to investors. “The better than expected revenue per loaded mile excluding fuel, improved safety results, and margin improvement across Swift’s reportable segments should encourage investors that KNX’s earnings improvement is driven by factors under management’s control, rather than solely macro.”

In the prior 52 weeks, according to data provided by Barchart, Knight Swift’s stock has plummeted 41 percent; it had been down as much as 50 percent on a 52-week basis not that long ago.  

The transportation team led by Amit Mehrotra at Deutsche Bank, which has a Buy rating on the stock (Morgan Stanley’s rating is “Overweight”) said a “more pronounced” rise in the stock might not come until “investors get comfortable that forward estimates have been de-risked in the context of slowing growth.” And that may not happen until there actually is a downturn in the economy. “Shares are at depressed-enough valuations where we see patience being ultimately rewarded,” Mehortra wrote.

John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.